Fundraising Saga of a Desperate Entrepreneur - Part 2
BY Shazi Visram
In the second part of this launch story, Shazi Visram, founder and CEO of Happy Family, shares how advice and angels helped her launch her growing company in 2006.
"Money money money money MONEY. " You all know the lyrics to that O'Jays song. Well, friends, I know the song and the dance. Getting HappyFamily off the ground wasn't easy, especially when it came to raising start-up and growth capital. What follows is my fundraising saga (part two of four parts).
One day, while deliberating on whether to take a sketchy VC deal, I got a phone call from a friend of a friend. Tracy had gone to Columbia Business School, too (gotta love that b-school network). Since her days as a student, she had started her own business (with some success), so she'd been in my shoes before. Moreover, she knew people in the food industry, and she wanted to help. We talked for a while, and I told her how things were going: big dream, no money, tempted to take the VC offer simply because I needed to get funding to move forward. I asked for her advice, and instead of giving it to me, she said, "let me call my lawyer, and I'll get back to you next week."
Then, the following week, Tracy called back. I cannot even summarize the conversation. It doesn't do it justice. She simply said, "Shazi, I really don't want you to do this deal. I'm going to wire you $20,000 for you to live off of for a few months and figure out how to start this business with other people and other partners." The loan showed up in my bank account the next day, and all of a sudden, I didn't need the VC deal anymore. Tracy was the first true angel to lift Happy back up on its feet and allow it to keep walking down the road toward fruition. (Tracy also became the first official investor in Happy Family, but more on that later).
Shortly thereafter, I got a random phone call from an eager young woman who worked in research at Whole Foods. She had heard about the business through the natural foods grapevine and wanted to get involved and be helpful in a different way. She started calling me--a lot--with all sorts of information about the industry. After a few of these calls, I got to know her and admired her persistence and organization. Within a few months, I asked her to come aboard to run operations as our COO and a founding partner. Today, Jessica still heads up operations, is a tremendous partner, and has been key to the execution behind the growth of the business.
So, within eight months, I had gotten a VC offer, declined it, been loaned $20,000, and found myself a new partner. Talk about things falling into place at the right time. After Jessica came on board, we put a new, pared down plan together to launch within a year. I continued to scrape cash together, both for my own living expenses and for the company. I even got a job selling Brooklyn real estate part time just to pay off credit card bills. Then, we started raising money from our inner circle: friends and family. We had our seed round of investment--lots of presentations, phone calls, meetings, and follow up, sometimes for a $10,000 check! But, eventually, we raised $550,000 to get started on the first product launch.
We launched our first line of frozen baby meals on Mother's Day 2006. This was so exciting, and sales were good. I soon learned that frozen baby food was not the alternative to jar food that I had dreamed it would be. It was the alternative to the homemade process. So, we started innovating in the dry set. This meant we had to raise even more money, so we opened a first round of investment, this time raising $1 million. This financing helped us to develop our revolutionary Happy Bellies cereals: the first ever probiotic cereal for babies, which got us some traction in the traditional baby food aisle. Next came the first ever organic puffed snack, Happy Puffs, which, you guessed it, required more money. So, we had a second round of financing.
Then, in 2008, we found a new technology to explore: the baby food pouch. I knew that the pouch was going to truly innovate the way babies are fed in our country, and we had to go for the gold (excuse the Olympics pun. Seems timely.) By this point, I had gotten pretty good at raising private money, and I had $3 million in commitments in the summer of 2008.
Then, September came, and the economy collapsed. More than 80% of the committed funds for this investment round pulled out because they were no longer in a position to fund. Moreover, during that time, there were so many other companies in the food space that were also raising money in a much smaller market. Companies were forced to have fire sales to continue to meet payroll, fund existing operations, working capital, and, of course, expansion. We were no exception--or so we thought.
We revised down sales projections, because we didn't know how our movement would be affected by the economy, and we didn't want to over-project. We offered a discount to the valuation. All of this resulted in a down round. This gave our investors a really good deal, but after the fact, we found out that we actually exceeded our initial sales projections (not even the revised ones!). As it turned out, our niche of premium organic baby food was recession resistant.
SHAZI VISRAM is the founder and CEO of HAPPYFAMILY, the leading premium brand of baby and toddler meals in the U.S. HAPPYFAMILY is sold in over 13,000 stores with 9 different lines of optimally delicious organic foods. @shaziv